Deutsche Bank's research report reveals a major shift in Fed policy expectations: the new chairman may start a continuous easing cycle
1. Dramatic changes in market expectations: the new chairman premium phenomenon emerges
On June 26, Deutsche Bank's latest research report pointed out that the financial market's expectations for the Fed's monetary policy in 2026 are undergoing structural adjustments, especially the expectations of interest rate cuts after the new chairman takes office, which are extremely aggressive. The core driving force of this change is that the term of the current Fed Chairman Powell will expire in May 2026, and US President Trump is considering breaking tradition and announcing his successor as early as this summer, thus forming a "shadow chairman" effect, affecting market expectations and policy trends in advance.
Breakthrough findings of statistical models
Deutsche Bank constructed a regression model and regressed the interest rate cut pricing in the second, third and fourth quarters of 2026 on the first quarter, and found that the residuals turned significantly negative in the past month, especially in the third quarter of 2026 (when the new chairman officially took office). The degree of deviation was the most obvious. This "new chairman premium" phenomenon shows that the market is pricing in unusually loose policies during the new chairman's term, and the pricing pattern has deviated from the historical norm in recent years. It is worth noting that the residual analysis shows that the market does not expect a sharp policy shift, but believes that the easing cycle will last longer - although the expectation of interest rate cuts in the second to fourth quarters of 2026 is less than that in the first quarter, the overall easing is significantly higher than the historical average.